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UK Inflation Surges Faster Than Expected

UK Inflation Surges Faster Than Expected

Rising air fares and food prices helped to push up UK inflation to its highest rate since July 2014 in December. Consumer price index inflation rose to 1.6% last month, up from 1.2% in November, the Office for National Statistics said. And higher costs for imported materials and fuels pushed up producer prices.
ONS head of inflation Mike Prestwood said: “This is the highest CPI has been for over two years, though the annual rate remains below the Bank of England’s target and low by historical standards, BBC reported.
“Rising air fares and food prices, along with petrol prices falling less than last December, all helped to push up the rate of inflation.
“Rising raw material costs also continued to push up the prices of goods leaving factories.”
Prior to the Brexit vote, inflation stayed between -0.1% and 0.1% for 10 months due to a collapse in oil prices and a supermarket price war that led to slashed prices, Business Insider reported.
Prices started to pick up following the Bank of England’s decision to cut interest rates in the aftermath of the UK’s vote to leave the European Union, and the fall in the value of the pound.
Expectations remain that inflation will jump sharply in the coming months as the effects of the weaker pound—which has fallen roughly 19% since the Brexit vote—trickle into the real economy, pushing up the price of goods.
As a result, the Bank of England has said that it is willing to tolerate an overshoot in inflation beyond its 2% target over the coming months in order to protect jobs.
Inflation will more than double to overshoot the Bank of England’s 2% inflation target in 2018, driven up by a falling currency, the central bank said in its quarterly Inflation Report in November.
“In the central projection, inflation rises from its current level of 1% to around 2.75% in 2018, before falling back gradually over 2019 to reach 2.5% in three years’ time,” the Bank said.
That assertion was reiterated by the bank’s Governor Mark Carney on Monday evening as he delivered a major speech discussing the relationship between inflation and output in the British economy.